AARP study details how housing market crash hurt older Americans

The notion that older American homeowners are more financially sound and thus were less impacted than their younger counterparts in the housing crisis has apparently been debunked.

New research released Thursday by the AARP, formerly called the American Association of Retired Persons, shows that despite public perception, the nation’s recent housing meltdown dealt the most forceful blow to homeowners 50-years-old and above -- and the challenges they face in recovery are far greater and more long-lasting than those of younger generations.

The AARP says the study -- dubbed “Nightmare on Main Street: Older Americans and the Mortgage Market Crisis” by Lori Trawinski, senior strategic policy advisor for the AARP Public Policy Institute -- is the first of its kind. It exposes how the housing and mortgage crisis has impacted different age groups. Researchers compiled the report by using loan data between 2007 and 2011 from CoreLogic in order to examine loan performance based on mortgage type and borrower age and demographics.

Overall, the study concluded the results, although somewhat staggering, are not surprising.

Owning a home has long been part of the American dream, and for the older population, the home is -- or was at some point -- their most valuable asset. Older Americans considered their homes a source of financial security, often using home equity during retirement to finance home maintenance, rising health care costs and other unexpected expenses at a period in their lives when they’re no longer receiving consistent cash flow or income.

“In recent years, the home ownership experience has changed from the American dream to the American nightmare for millions of older homeowners,” the study said.

While it’s hard for people at any age to recover from losing their home, older homeowners are in a more serious predicament than those who are younger, the study said.

Many older homeowners drained their retirement or savings accounts in an attempt to save their homes, and they have fewer years remaining to return to the workforce and recover their losses. Older homeowners who were laid off during the economic recession are also unemployed for longer and, if they’re able to find another job at all, the wages are often much lower.

Here are some of the study’s key findings:

• More than 1.5 million Americans age 50 and above lost their homes to foreclosure between 2007 and 2011.

• As of December 2011, 3.5 million older homeowners nationwide with outstanding mortgages, or 16 percent, were underwater, meaning they had no home equity, while another 600,000 were in some stage of the foreclosure process and 625,000 more were 90 days or more late on their mortgage payments.

• Although the percentage of homeowners with mortgage payments 90 days or more late remained greater among the under-50 population during the housing crisis, the serious mortgage delinquency rate for homeowners age 50 and above jumped substantially more than younger homeowners. The percentage of homeowners age 50 and above who were seriously delinquent surged 456 percent between 2007 and 2011, from 1.1 percent to 6 percent, respectively. The serious delinquency rate for homeowners below age 50, on the other hand, spiked 361 percent during the same period, from 1.6 percent in 2007 to 7.5 percent in 2011.

• Among all mortgage holders ages 50 and above, the mortgage crisis had the biggest negative impact on those with middle incomes. About 53 percent of all foreclosures in the 50-plus population last year were individuals with annual incomes ranging between $50,000 and $124,999. The second-largest chunk -- 32 percent -- was made up of borrowers with incomes below $50,000.

• For homeowners ages 50 and above with outstanding prime loans, the foreclosure rate was 2.3 percent last year -- 23 times higher than in 2007.

• The foreclosure rate of subprime mortgage holders ages 50 and above skyrocketed from 2.3 percent in 2007 to almost 13 percent in 2011.

• At the end of last year, mortgage holders age 75-plus had the worst foreclosure rate among the 50 and above population at 3.19 percent, up 867 percent from 2007. Those in the 50-64 age bracket had the second highest foreclosure rate last year at 2.98 percent, which was an 861 percent surge from 2007.

• Although homeowners in the 65-74 age range posted the lowest foreclosure rate of the older population last year, 2.55 percent, the age bracket saw the biggest increase in foreclosures since 2007, spiking 920 percent.